PART I

You are an accountant and have two clients you?ll be dealing with during this assignment. JumpinJehosaPhats is a haberdashery (Google it!), and is owned by J.J. Phats. JJ is expanding the company and is in need of advice. He has come to you to discuss the future of the company.

Part 1 ? Incorporating

Discuss in detail the requirements of incorporating the business, the advantages and disadvantages, and provide JJ with recommendations.

PART II

Financial Statement Analysis provides information that indicates how a company is performing. By comparing financial statements of different years, a manager can make informed decisions about investments, expenditures, and activities that impact revenues.

Directions: Read the chapter in the text titled ?Financial Statement Analysis.? Using the comparative financial statements for Baby Cakes International Inc. (see ?BabyCakes_Financial_Project_Data.xls? linked in the lesson activities) , complete the following tasks.

Note: The market price of BabyCakes Int?l, Inc. common stock was $20 on December 31, 2008.

• Complete the 19 ratios listed below.

Determine the following measures for 2008:

Working Capital

Current ratio

Quick ratio

Accounts receivable turnover

Number of days? sales in receivables

Inventory turnover

Number of days? sales in inventory

Ratio of fixed assets to long-term liabilities

Ratio of liabilities to stockholders? equity

Number of times interest charges earned

Number of times preferred dividends earned

Ratio of net sales to assets

Rate earned on total assets

Rate earned on stockholders? equity

Rate earned on common stockholder?s equity

Earnings per share on common stock

Price-earnings ratio

Dividends per share of common stock

Dividend yield

• Explain what the results of each ratio indicate about the company.

Part C: Complete a horizontal analysis for the Income Statement, and explain your findings.

Part D: Complete a vertical analysis for the Income Statement, and explain your findings.

Part III Cash Flow

Your second client, Bailey?s Chocolates, is asking you to produce a Cash flow from Operating Activities. Using the Indirect Method and the information provided, calculate the cash flow from Operating Activities.

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